[BPDÄ795ÄNC] RIN: 0938ÄAG56 Medicare Program; Schedule of Limits for Skilled Nursing Facility Inpatient Routine Service Costs AGENCY: Health Care Financing Administration (HCFA), HHS. ACTION: Final notice with comment period. SUMMARY: This final notice with comment period provides that there will be no changes in the skilled nursing facility (SNF) cost limits for cost reporting periods beginning during Federal fiscal years 1994 and 1995 and that the add-on for administrative and general costs of hospital-based SNFs is eliminated. This notice announces provisions of the Omnibus Budget Reconciliation Act of 1993 that affect the schedule of limits on SNF routine service costs for which payment may be made under the Medicare program and explains the effects of these provisions on the methodology used in calculating the SNF cost limits. DATES: Effective date: The provisions set forth in this notice are effective for cost reporting periods beginning on or after October 1, 1993. Comment date: Written comments will be considered if we receive them at the appropriate address, as provided below, no later than 5 p.m. on [March 7, 1994]. ADDRESSES: Mail written comments (1 original and 3 copies) to the following address: Health Care Financing Administration Department of Health and Human Services Attention: BPDÄ795ÄNC, P.O. Box 7571, Baltimore Maryland 21207Ä0517. If you prefer, you may deliver your comments to one of the following addresses: Room 309ÄG, Hubert H. Humphrey Building, 200 Independence Ave. SW., Washington DC 20201, or Room 132, East High Rise Building 6325 Security Boulevard Baltimore Maryland 21207. Because of staffing and resource limitations, we cannot accept comments by facsimile (FAX) transmission. In commenting, please refer to file code BPDÄ795ÄNC. Comments received timely will be available for public inspection as they are received, beginning approximately three weeks after publication of a document, in room 309ÄG of the Department's offices at 200 Independence Avenue SW., Washington DC, on Monday through Friday of each week from 8:30 a.m. to 5:00 p.m. (Phone: 202Ä690Ä7890). Copies: To order copies of the Federal Register containing this document, send your request to: New Orders, Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250Ä7954. Specify the date of the issue requested and enclose a check or money order payable to the Superintendent of Documents, or enclose your Visa or MasterCard number and expiration date. Credit card orders can also be placed by calling the order desk at (202) 783Ä3238 or by faxing to (202) 275Ä6802. The cost for each copy (in paper or microfiche form) is $4.50. As an alternative, you can view and photocopy the Federal Register document at most libraries designated as U.S. Government Depository Libraries and at many other public and academic libraries throughout the country that receive the Federal Register. FOR FURTHER INFORMATION CONTACT: Laurence Wilson, (410) 966Ä4603 SUPPLEMENTARY INFORMATION: I. Background Sections 1861(v)(1)(A) and 1888 of the Social Security Act (the Act) authorize the Secretary to set limits on allowable costs incurred by a provider of services for which payment may be made under Medicare. These limits are based on estimates of the costs necessary for the efficient delivery of needed health services. Implementing regulations appear at 42 CFR 413.30. Section 1888 of the Act directs the Secretary to set limits on per diem inpatient routine service costs for hospital-based and freestanding skilled nursing facilities (SNFs) by urban or rural area location. Section 4008(e)(2) of the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101Ä508) amended section 1888(a) of the Act to require the Secretary to update the per diem SNF cost limits for cost reporting periods beginning on or after October 1, 1992, and every 2 years thereafter. Under the authority of section 1888 of the Act, we published a final notice on October 7, 1992 (57 FR 46177) announcing a schedule of limits for freestanding and hospital-based SNFs effective for cost reporting periods beginning on or after October 1, 1992. The limits were computed using data from cost reporting periods ending on or after June 30, 1989, through May 31, 1990, for freestanding SNFs and from cost reporting periods ending on or after October 31, 1988, through September 30, 1989, for hospital-based SNFs. The October 7, 1992 final notice contained provisions relating to: (1) Separate group limits for labor-related and nonlabor-related components of SNF per diem routine service costs; (2) Adjustments to the cost limits by an area wage index developed from hospital industry wages; (3) A "market basket'' index developed to reflect changes in the price of goods and services purchased by SNFs; (4) Application of the adjusted hospital wage index to wages, employee benefits, health service costs, costs of business services, and other miscellaneous expenses; (5) Freestanding SNF cost limits set at 112 percent of the average per diem labor-related and nonlabor-related costs; (6) Hospital-based SNF cost limits set at the limit for freestanding SNFs, plus 50 percent of the difference between the freestanding limit and 112 percent of the average per diem routine service costs of hospital-based SNFs, and an add-on for administrative and general (A&G) costs; (7) Cost-of-living adjustments for Alaska, Hawaii, Puerto Rico, and the Virgin Islands; (8) Exceptions to the cost limits; (9) A classification system based on whether the SNF is hospital-based or freestanding and whether it is located in an urban or rural area. In addition to the above provisions, the October 7, 1992 final notice also provided for a per diem add-on to recognize the costs incurred by SNFs in complying with the additional nursing home reform requirements of section 1819 of the Act (including the costs of conducting nurse aide training and competency evaluations). (Section 1861(v)(1)(E) of the Act provides for Medicare payment for costs incurred by SNFs in complying with the requirements of section 1819 of the Act.) The October 7, 1992 notice also included an add-on to the cost limits to recognize the costs that SNFs may incur in meeting the universal precaution requirements of the Occupational Safety and Health Administration (OSHA). These requirements were described in a final rule published by OSHA in the Federal Register on December 6, 1991 (54 FR 64004) that set forth a standard under section 6(b) of the Occupational Safety and Health Act of 1970 (29 U.S.C. 655) to eliminate or minimize occupational exposure to bloodborne pathogens. II. Provisions of This Final Notice With Comment Period A. No Changes in the Cost Limits On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA '93), Public Law 103Ä66, was enacted. Section 13503(a)(1) of OBRA '93 requires that there be no changes in the SNF routine cost limits (except as may be necessary to take into account the elimination of the administrative and general add-on for hospital-based SNFs) for cost reporting periods beginning during Federal fiscal years (FY) 1994 and 1995, that is, for cost reporting periods beginning on or after October 1, 1993, and before October 1, 1995. The effect of this provision is that a SNF's latest routine cost limit for a period beginning on or after October 1, 1992 and before October 1, 1993, as calculated under the October 7, 1992 notice, without regard to any subsequent adjustments under section 1888(c) of the Act such as exceptions, will remain in effect until its cost reporting period beginning on or after October 1, 1995. Accordingly, there will be no changes to a SNF's cost limit for cost reporting periods beginning on or after October 1, 1993, and before October 1, 1995, to account for inflation, updates of the data, changes to the wage index or to MSA designations. Thus, in computing a provider's cost limit for cost reporting periods beginning on or after October 1, 1993 and before October 1, 1995, the cost reporting period adjustment factors that were to apply for cost reporting periods beginning on or after October 1, 1993, as set forth in Table IV of the October 7, 1992 notice (57 FR 46188), will not be used. Other components of the October 7, 1992 notice, specifically the SNF Group Limits in Table I, and the wage indexes in Tables II and III will continue to be used to compute the limits, with the exception in Table I of the add-on for administrative and general costs of hospital-based SNFs. In the example below, a freestanding SNF in Dallas, Texas has a cost reporting period beginning date of January 1, 1993. As calculated under the October 7, 1992 notice, its cost limit for the 12-month period beginning January 1, 1993 is $96.97. Under the provisions of this notice, the cost limit of $96.97 will remain in effect for its 12-month cost reporting periods beginning January 1, 1994 and January 1, 1995. As explained above, the cost reporting period adjustment factors that would have been used under the October 7, 1992 notice for calculating the limits for the SNF's new cost reporting periods beginning January 1, 1994 and January 1, 1995, are not used. Accordingly, the provider in this example will not have any change in its cost limit until its cost reporting period beginning January 1, 1996. Example Calculation of Adjusted Limit for a Freestanding SNF Located in Dallas, Texas (using the appropriate tables from the October 7, 1992 schedule of limits): c3,L0,tp0,p0,8/9,g1,t1,i1,s200,12,xs48 [col head 1] [col head 1] [col head 1] Labor-Related Component $79.56 (Table I). Wage Index x 0.9638 (Table II). ===== Adjusted Labor Component $76.68 Nonlabor-Related Component +17.08 (Table I). Nursing Home Reform and OSHA Per Diem Add-On +1.98. ===== Limit Prior To Inflation Adjustment $95.74 Adjustment Factor x 1.01286 (Table IV). ===== Inflation Adjusted Limit $96.97 As noted above, for cost reporting periods beginning on or after October 1, 1993 but before October 1, 1995, a SNF's cost limit will be its latest routine cost limit for the period beginning on or after October 1, 1992 and before October 1, 1993, as calculated under the October 7, 1992 notice and without regard to any subsequent adjustments, such as an exception to the limit. Thus, if the SNF in the above example received an exception to its cost limit for its cost reporting period beginning January 1, 1993, its cost limit for the cost reporting period beginning January 1, 1994 would not include the exception amount for the previous period. To receive an exception or other adjustment to its cost limit, the SNF would need to submit a request to its fiscal intermediary in accordance with the procedures set forth in  413.30 of the regulations. B. Periods Other Than 12 Months The above methodology applies to providers with cost reporting periods of 12 months in duration. If a facility's cost reporting period is not 12 months in duration, a special adjustment factor is calculated. This is necessary because inflation projections are computed to the midpoint of a cost reporting period, and the adjustment factors in Table IV are based on 12-month reporting periods. For cost reporting periods of other than 12 months, the calculation must be made based on the midpoint of the specific cost reporting period. The SNF's intermediary obtains this adjustment factor from HCFA central office. This methodology results in a different cost limit than if a 12-month adjustment factor were used. However, since the provisions of OBRA '93 require no changes in the cost limit on or after October 1, 1993, the limit calculated with the special adjustment factor will remain in place for subsequent cost reporting periods beginning before October 1, 1995. C. Providers Entering the Medicare Program For providers entering the Medicare program on or after October 1, 1993 and before October 1, 1995, the applicable cost limit will be the cost limit for the identical period beginning on or after October 1, 1992 through September 30, 1993. For example, if a provider enters the Medicare program on September 1, 1994, with a 12-month cost reporting period, its cost limit will be determined in the same manner as a cost limit for a period beginning September 1, 1993 and ending August 30, 1994. If the provider's cost reporting period is a short period beginning September 1, 1994 and ending December 31, 1994, the provider's cost limit will be determined in the same manner as a cost limit for a period beginning September 1, 1993 and ending December 31, 1993. In addition, whether the first period is a full 12-month period or a period other than 12 months, the cost limit determined for the first period will remain in effect until the provider's first cost reporting period beginning on or after October 1, 1995. D. Next Update of Limits As discussed above, before the enactment of OBRA '93, section 1888(a) of the Act required that the SNF routine cost limits be updated on October 1, 1992 and every 2 years thereafter. Section 13503(a)(1) of OBRA '93 amended this section to delay the next update until October 1, 1995, and every 2 years thereafter. Accordingly, there will be no changes to the routine cost limits published in the October 7, 1992 notice for inflation, changes in the wage index, geographic designation, or for a more recent data base until October 1, 1995. E. Add-On for Hospital-Based SNFs Before the enactment of OBRA '93, section 1888(b) of the Act provided for an add-on to recognize the cost differences between hospital-based and freestanding SNFs attributable to excess overhead allocations, that is, an add-on for the administrative and general costs (A&G) of hospital-based SNFs. Section 13503(a)(3) of OBRA '93 amended this section of the Act to repeal the requirement that we recognize cost differences attributable to excess overhead allocations. Therefore, this notice implements that provision by eliminating the A&G add-on for hospital-based SNFs. In addition, while section 13503(a)(1) of OBRA '93 requires that there be no changes in the cost limits, as explained above, it also states that the provision does not apply to the elimination of the A&G add-on for hospital-based SNFs. Therefore, effective for cost reporting periods beginning on or after October 1, 1993, we will no longer apply the administrative and general add-on for hospital-based SNFs as shown in Table I of the October 7, 1992 schedule of limits. The intermediary will continue to determine the cost limits for hospital-based SNFs using the relevant instructions and Table I SNF Group Limits, as described in the October 7, 1992 notice. However, for cost reporting periods beginning on or after October 1, 1993, these limits will be calculated without using the A&G add-on. The example below uses information from Table I of the October 7, 1992 schedule of limits to calculate a cost limit for a hospital-based SNF located in Scranton, Pennsylvania. The cost limit is for a cost reporting period beginning October 1, 1993. However, as discussed above, the A&G add-on for hospital-based SNFs is no longer applied, and the cost limit effective October 1, 1992 remains in effect for the cost reporting period beginning on or after October 1, 1993. Example Calculation of Adjusted Limit Effective October 1, 1993, for a Hospital-Based SNF Located in Scranton, Pennsylvania: c3,L0,tp0,p0,8/9,g1,t1,i1,s200,12,xs48 [col head 1] [col head 1] [col head 1] Labor-Related Component Limit $112.22 (Table I). Wage Index x 0.8952 (Table II). ===== Adjusted Labor Component $100.46 Nonlabor-Related Component: Limit 23.79 (Table I). Nursing Home Reform and OSHA Per Diem Add-on +1.98 ===== Adjusted Limit $126.23 F. Adjustments to the Routine Limits Section 1888(c) of the Act provides for appropriate adjustments to the SNF routine cost limits. These adjustments are set forth at  413.30 and include: exemptions from the cost limits for new providers; exceptions to the limits for atypical services and extraordinary circumstances; and other provisions. Section 13503(a)(1) of OBRA '93 mandates that the effect of allowing no changes in the SNF routine cost limits for cost reporting periods beginning during FYs 1994 and 1995 not be considered in making adjustments to the routine cost limits under the exceptions process. Therefore, effective for cost reporting periods beginning on or after October 1, 1993, and before October 1, 1995, a provider may request an exception only for costs incurred above the amount that the limit would have been had the provisions set forth in this notice regarding no changes in the cost limits not been enacted. Accordingly, for the purpose of determining the amount of an exception to the SNF routine cost limits under the regulations at  413.30(f), the difference between the amount of a provider's cost limit as determined by the provisions set forth in this notice, and the amount that a provider's cost limit would have been under the October 7, 1992 notice had the provisions described herein not been enacted, is not subject to an exception to the routine cost limits. We note that this provision does not apply to the A&G add-on for hospital-based SNFs. That is, for cost reporting periods beginning on or after October 1, 1993, the A&G add-on for hospital-based SNFs will not be used in computing the amount that the hospital-based cost limit would have been had the provisions requiring no changes in the limits not been enacted. In addition, we note that this provision has no effect on new provider exemptions to the SNF cost limits, as set forth under  413.30(e)(2), since this exemption removes the limitation on a SNF's routine costs. The example below demonstrates the computation to determine the amount not subject to an exception under the provisions set forth in this notice. The provider's cost limit is computed for the cost reporting period beginning January 1, 1993, in accordance with the provisions set forth in this notice, and this limit remains in effect until the cost reporting period beginning January 1, 1995. The provider has requested an exception to its limit for the period beginning January 1, 1994. Again, we use the information from the October 7, 1992 notice to calculate what the limit would have been had the OBRA '93 provisions requiring no changes in the limits not been enacted. The difference of $5.04 between the actual limit and the amount the limit would have been is the amount not subject to an exception. Example Calculation of Amount Not Subject to an Exception to the Limits Freestanding SNF Located in Dallas, Texas: c3,L0,tp0,p0,8/9,g1,t1,i1,s200,12,xs48 [col head 1] [col head 1] [col head 1] Labor-Related Component $79.56 (Table I). Wage Index x 0.9638 (Table II). ===== Adjusted Labor Component $76.68 Nonlabor-Related Component +17.08 (Table I). Nursing Home Reform and OSHA Per Diem Add-On +1.98 ===== Limit Prior To Inflation Adjustment $95.74 Adjustment Factor (January 1, 1993) x 1.01286 (Table IV). ===== Inflation Adjusted Limit (Limit in Effect for January 1, 1993, January 1, 1994, January 1, 1995) $96.97 Adjustment Factor (January 1, 1994 for Exception Purposes Only) x 1.06553 (Table IV). ===== Inflation Adjusted Limit (January 1, 1994 for Exception Purposes Only) $102.01 Amount Not Subject to Exception ($102.01Ä$96.97) $5.04 III. Impact Statement Executive Order 12866 (E.O. 12866) requires us to prepare an analysis for any rule that meets one of the E.O. 12866 criteria for a "significant regulatory action''; that is, that may Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or Raise a novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in E.O. 12866. In addition for final notices such as this, we generally prepare a regulatory flexibility analysis that is consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 through 612) unless the Secretary certifies that this notice will not have a significant economic impact on a substantial number of small entities. For purposes of the RFA, all SNFs are treated as small entities. This final notice with comment period announces the provisions of section 13503(a) of OBRA '93, which provides for a delay in the updates of the limits on payments for routine SNF services through cost reporting periods beginning before October 1, 1995, and provides for the elimination of the A&G add-on for hospital-based SNFs effective for cost reporting periods beginning on or after October 1, 1993. None of the provisions of this notice interprets or extends requirements beyond those set forth in OBRA '93. Sections 13503(a)(1) and (3) of OBRA '93 will result in significant Federal cost savings. The impact of these provisions is discussed further below. This notice explains the revised methodology for calculating the SNF limits that results from the provisions of OBRA '93. We do not believe that merely reflecting these provisions in this notice produces any effect that will meet any of the criteria of E.O. 12866 for a significant regulatory action or will have a significant effect on a substantial number of small entities. Therefore, we have determined and the Secretary certifies that neither an impact analysis under E.O. 12866 nor a regulatory flexibility analysis under the RFA are required. To the extent that a legislative provision being announced by a notice such as this may have a significant effect on beneficiaries or providers or may be viewed as controversial, we believe that we should address any potential concerns. In this instance, we believe it is desirable to inform the public of our estimate of the substantial budgetary effect of these statutory changes. We estimate that these statutory provisions will result in the following savings to the Medicare program: c3,L2,i1,s20,8,8 Table 1. Impact of Delay in the Update of SNF Limits and Elimination of Add-on* [col head 1] Fiscal year [col head 1] Update delay [col head 1] Elimination of add-on 1994 $30 $10 1995 120 10 1996 90 10 1997 10 1998 10 *All figures are rounded to the nearest $10 million. As illustrated in Table 2 below, the delay in updating the cost limits until October 1, 1995, combined with the elimination of the A&G add-on for hospital-based SNFs, will result in a small increase in the number of SNFs exceeding the SNF limits in all categories, although we cannot isolate the separate impact of these factors. Table 2 below shows the combined impact of these changes. c4,L2,i1,s20,12,12,12 Table 2. [col head 1] [col head 1] Total SNFs [col head 1] Exceeding old limits [col head 1] Exceeding new limits Freestanding SNFs 5340 911 1209 Urban 4074 706 930 Rural 1266 205 279 Hospital-based SNFs 908 518 563 Urban 455 298 321 Rural 453 220 242 We are unable to identify the effects of these provisions on individual SNFs. However, we anticipate that overall SNF payments for FY 1994 and FY 1995 will be approximately 1.2 percent and 2.3 percent less, respectively, than they would have been in those years if the OBRA '93 provisions were not in effect. Moreover, since Medicare does not account for a high proportion of SNF utilization or revenue, we estimate that the delay in updating the limits and the elimination of the hospital-based add-on will not result in a significant number of facilities' total revenues being increased or reduced by 3 percent or more from the October 7, 1992 limits, adjusted for inflation. Thus, we have determined that the economic impact on SNFs will not be significant. Section 1102(b) of the Act requires the Secretary to prepare a regulatory impact analysis if a final notice such as this may have a significant impact on the operations of a substantial number of small rural hospitals. Such an analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital with fewer than 100 beds located outside of a Metropolitan Statistical Area. We have not prepared a rural impact statement since we have determined and the Secretary certifies that this final notice will not have a significant economic impact on the operations of a substantial number of small rural hospitals. IV. Other Required Information A. Paperwork Reduction Act This final notice with comment period does not impose information collection requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 through 3511). B. Waiver of Proposed Notice and 30-Day Delay in the Effective Date In adopting notices such as this, we ordinarily publish a proposed notice in the Federal Register with a 60-day period for public comment as required under section 1871(b)(1) of the Act. We also normally provide a delay of 30 days in the effective date for documents such as this. However, we may waive these procedures if we find good cause that prior notice and comment or a delay in the effective date are impracticable, unnecessary, or contrary to the public interest. As discussed above, before the enactment of OBRA '93, section 1888(a) of the Act required that the SNF routine cost limits be updated for cost reporting periods beginning on or after October 1, 1992 and every 2 years thereafter. However, section 13503(a)(1) of OBRA '93 specifies that there be no changes in the SNF cost limits for cost reporting periods beginning during FYs 1994 and 1995, and section 13503(a)(2) of OBRA '93 amended section 1888 of the Act to delay the next required update of the SNF limits until October 1, 1995. In addition, section 13503(a)(3) of OBRA '93 amended section 1888(b) of the Act to eliminate, effective for cost reporting periods beginning on or after October 1, 1993, the add-on to the SNF cost limits to recognize the higher administrative and general costs of hospital-based SNFs. In conformance with the clear direction of section 13503(a) of OBRA '93, this notice announces the new SNF provisions and explains the effects of these provisions on the methodology used in calculating the SNF cost limits. We have made no changes in this methodology beyond those directly required by OBRA '93, nor are there any other discretionary aspects to this notice. Moreover, section 13503(a) of OBRA '93 mandates that these provisions are effective beginning with cost reporting periods beginning on or after October 1, 1993. Thus, we have concluded that in this instance, it would be impracticable, unnecessary, and contrary to the public interest to publish a proposed notice or to provide for a 30-day delay in the effective date of this notice. Therefore, we find good cause to waive publication of a proposed notice and the 30-day delay in effective date. However, we are providing a 60-day period for public comment, as indicated at the beginning of this preamble. C. Public Comments Because of the large number of items of correspondence we normally receive, we are not able to acknowledge or respond to them individually. However, we will consider all comments that we receive by the date and time specified in the "Date'' section of the preamble to this notice. If we make any changes to this notice, we will respond to the comments in the preamble to the notice that incorporates the changes. Authority: (Sections 1102, 1814(b), 1861(v)(1), 1866(a), 1871, and 1888 of the Social Security Act (42 U.S.C. 1302, 1395f(b), 1395x(v)(1), 1395cc(a), 1395hh, and 1395yy); section 6024 of Pub. L. 101Ä239 (42 U.S.C. 1395yy(note)); section 13503 of Pub. L. 103Ä66 (42 U.S.C. 1395yy(note)) and 42 CFR 413.30.) (Catalog of Federal Domestic Assistance Program No. 93.773 Medicare-Hospital Insurance Program) Dated: November 23, 1993. Bruce C. Vladeck, Administrator, Health Care Financing Administration. Dated: November 28, 1993. Donna E. Shalala, Secretary. [FR Doc. 94Ä62 Filed 1Ä5Ä94; 8:45 am] BILLING CODE 4120Ä01ÄP